While reviewing the fiscal policy, the corrective measures taken by the government, both on the fiscal deficit and quasi fiscal deficit were discussed.
The Board was of the view that revenue targets both on tax and non-tax sides are met and expenditure controls continue to remain well in place. The key economic variables for the first half of fiscal year 2019 were deliberated in detail. The meeting noted that the direction of external trade data is encouraging and points to the fact that fiscal and monetary tightening are having an impact on correcting the imbalances. The growth in remittances is also encouraging.
The meeting was also of the view that there was substantial participation in the last auction for PIBs. The real interest rates are positive and would help manage aggregate demand and reduce the output gap, the meeting further observed.
On the monetary front, State Bank of Pakistan (SBP) reported that M2 in fiscal year 2019 is growing at higher pace while NFA has contracted.
Turning to private sector credit, its growth momentum continued and is explained by increased input prices, the continuation of the investment cycle and ample liquidity with banks.
Moreover, analysis shows that subsidized and non-subsidized credit to export-orientated sector was increased. The meeting was attended by Minister for Planning, Development & Reforms, Dr. Furrukh Iqbal, Director IBA, officials from Ministry of Finance and SBP.